The renewed interest among investors to put on risk after the European Central Bank’s plan to help stabilise the eurozone market through buy-backs of government bonds on Thursday evening continued on Friday with several major Asian markets adding more than 2%.
The optimism was given further fuel as China announced a number of infrastructure projects, spanning roads, water and ports, to prevent a further slowdown in its economy.
Taking advantage of this backdrop and the strong demand for three relatively large transactions on Thursday night, including the $2 billion sell-down in AIA by American International Group, two more sizeable block trades hit the market after the close on Friday.
The largest of the two was a HK$4.11 billion ($530 million) offering in China Construction Bank (CCB), which was done at a fixed price and kept open for just 25 minutes.
The other was a Rp3.285 trillion ($342 million) block in Sarana Menara Nusantara, an owner and operator of mobile telecom towers in Indonesia. That deal too was done at a fixed price and offered to investors on a first-come, first-serve basis. The order book was said to have closed after about half an hour.
Separately, Credit Suisse was also in the market with a smaller sell-down by United Microelectronics Corp (UMC) in Novatek Microelectronics Corp, a Taiwan-based designer and manufacturer of integrated circuits for use in mobile phones, computers, and LCD drivers. There was no immediate information about the final price of that deal, but at the mid-point it will raise about $58 million.
The deal comprised 18 million shares, or 3% of the company. The shares were offered at a price between NT$95.85 and NT$97, which translated into a discount of 3% to 4.2% versus Friday’s close of NT$100.
The seller of the CCB shares wasn’t disclosed, except to note that it wasn’t an insider. Given that the seller will be subject to a 90-day lockup following this deal, one can also assume that it will still own a stake in the company.
The sale amounted to 810 million H-shares, which were offered at a fixed price of HK$5.08 each — a 2% discount versus Friday’s close of HK$5.18. That looked tight given that the share price gained 3.8% on Friday. However, the stock has been on a declining trend in the past three weeks and is trading about 20% below this year’s high of HK$6.59 that it hit February. And despite the relatively large size in dollar terms, the deal also accounted for no more than 0.3% of the H-share capital.
A source said that more than 50 investors participated in the transaction. They included the usual mix of long-only accounts and hedge funds and were primarily Asia-based, with a bit of US demand thrown in as well.
Joint bookrunners Deutsche Bank and HSBC hadn’t lined up any investors pre-launch, but the source noted that anyone that has been keeping an eye on financial stocks lately would know that there would be interest. “A lot of people didn’t get what they wanted on AIA, and a lot of people didn’t get what they wanted on this one either,” one source said. “There is an incredible appetite out there right now,” added another.
The decision to do a fixed-price deal was said to have been taken in light of the fact that it was a Friday night and the bookrunners wanted a structure that could get done quickly.
Sarana Menara Nusantara
There seems to have been a similar thinking around the Indonesian block in Sarana Menara Nusantara, which was offered at a fixed price of Rp20,000 a share. The sellers — two corporate Indonesian entities by the name of Tricipta Mandhala Gumilang and Caturguwiratna Sumapala — sold approximately 164.3 million shares, which represented 16.1% of the company. They will be locked up for 90-days following this deal.
The price translated into a 15.6% discount versus Friday’s close of Rp23,700, but since the share price has gained a lot since late August the deal was also marketed at a discount versus the 10-day volume-weighted average price. That discount was significantly narrower at 5.9%.
Credit Suisse was the sole bookrunner. According to a source, it had lined up anchor investors for at least half the deal before launch, and there was good demand for the rest of the transaction as well as the stock has a good following among a group of international investors that like telecom tower operators — a sector that is quite defensive and tends to have steady revenues and pay relatively high dividends. The deal was bought by a smallish group of less than 30 investors.
Bankers say they expect several more block trades to hit the market this week as sellers try to make the most of the current upbeat market environment.